The opinion
NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule
23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28,
as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties
and, therefore, may not fully address the facts of the case or the panel's
decisional rationale. Moreover, such decisions are not circulated to the entire
court and, therefore, represent only the views of the panel that decided the case.
A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25,
2008, may be cited for its persuasive value but, because of the limitations noted
above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260
n.4 (2008).
COMMONWEALTH OF MASSACHUSETTS
APPEALS COURT
22-P-1224
YEKATERINA MERKULOVA
vs.
LDJ DEVELOPMENT, LLC, & another. 1
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
Yekaterina Merkulova brought this action alleging
violations of the security deposit statute, G. L. c. 186, § 15B,
and G. L. c. 93A, after the defendants, Premier Property
Solutions, LLC (PPS), and LDJ Development, LLC (LDJ), refused to
return $3,400 she paid as a deposit to hold an apartment that
she ultimately did not rent and for which she never signed a
lease. On cross motions for summary judgment, a judge of the
Housing Court concluded that there was no permissible basis
under § 15B to charge Merkulova a "hold fee" and ordered the
defendants to return the deposit. The judge also concluded that
the defendants' failure to promptly refund the deposit
constituted an unfair and deceptive practice under G. L. c. 93A
1 Premier Property Solutions, LLC.
§§ 2, 11, that the conduct was willful and knowing, and that
Merkulova was entitled to treble damages. 2 The judge dismissed
the defendants' counterclaims which attempted to justify their
retention of the deposit and sought additional damages based on
two theories: detrimental reliance and breach of contract.
This appeal followed. We affirm.
Background. We summarize the relevant undisputed facts
from the summary judgment record as follows. LDJ is the owner
of a residential building located at 80 The Fenway in Boston
(the building). PPS is a property management company which
manages the building for LDJ.
In the Spring of 2020, Merkulova was in the process of
relocating to Boston from New York to begin a medical residency
and was looking for an apartment. When she and her prospective
roommate learned that apartment 41 in the building was
available, she expressed interest in renting it through her real
estate agent, Morgan Long. On or about May 2, 2020, Long
contacted PPS's leasing and sales manager, Steven Schlom, and
asked what would be required to apply for the apartment.
According to his affidavit submitted in support of the
defendants' motion for summary judgment, Schlom replied that "to
reserve the unit" he needed "payment of a first month's rent
2 The judge also awarded attorney's fees and costs.
2
[$3,400], as a hold fee and completion of a standard Greater
Boston Real Estate Board Application for each prospective
tenant." Schlom also indicated that last month's rent and a
security deposit would be due at a later date.
Thereafter, Merkulova submitted a rental application, a $30
fee, and wired $3,400.00, which was deposited into an escrow
account. Schlom confirmed that he received the deposit on May
7, 2020. 3 Then, on May 10, 2020, Schlom changed the status of
the apartment on MLS (Multiple Listing Service) to "under
agreement" and on the following day he sent a draft lease with a
start date of June 1, 2020, to Long. 4
Over the course of a week or so, the parties negotiated the
terms and conditions of the proposed tenancy. 5 On May 15, 2020,
Long informed Schlom that the lease terms were acceptable and
that Merkulova "should have the lease back sometime tomorrow."
That same day, Schlom released the deposit to PPS by writing a
check from the escrow account in the amount of $3,400.00, which
3 In the factual background to their counterclaims, the
defendants' alleged: "On or about May 7, 2020, Schlom received
and confirmed receipt of one month's rent to hold the apartment
pending application" (emphasis added).
4 Merkulova's prospective roommate also submitted a rental
application and a $30 fee, but she has not participated in this
litigation.
5 The negotiations concerned the removal of furniture and the
installation of a key and lock instead of a keypad.
3
was then deposited into a PPS bank account. The notation on the
check reads: "80 The Fenway #41 -- First Month Rent."
As it turned out, Merkulova decided not to rent the
apartment and entered into a lease for a different apartment.
On May 21, 2020, Long informed Schlom that the deal had fallen
through and requested the return of the $3,400.00 deposit.
Schlom replied: "the deposit was not going to be returned, [it]
had already been released to the owner, and instead would be
retained as damages per the terms of the Rental Application."
Schlom further averred that he was surprised by Long's message
as he had been "led to believe" that Merkulova intended to rent
the apartment.
Also on May 21, 2020, Schlom relisted the apartment as
available for rent on MLS. However, according to Schlom, there
was little interest in the apartment at the advertised rental
rate. The rental price for the apartment was lowered twice and
ultimately was rented on June 22, 2020, at $3,000.00 per month
with a start date of September 1, 2020.
Within a week of learning that the defendants would not
return her deposit, on May 29, 2020, Merkulova sent a demand
letter pursuant to G. L. c. 93A. The defendants again refused
to return the deposit. In their response letter they claimed
that Merkulova had breached the contractual provisions of the
rental application by failing to execute a lease agreement and
4
that her deposit would be applied to their damages, which
included the loss of rent for two months.
As previously noted, Merkulova then brought this action
alleging that the defendants had violated the security deposit
statute by charging her a hold fee and sought damages for unfair
and deceptive practices under G. L. c. 93A. The defendants
filed an answer and counterclaims as described above. They
further alleged they suffered damages in the amount of
$11,600.00, an amount equal to the difference between what the
rental would have been if Merkulova had signed the lease and
started a June rental, and the amount of rent actually received
from June of 2020 to June of 2021. 6 Both parties moved for
summary judgment. Following two hearings, the judge denied the
defendants' motion, 7 allowed Merkulova's motion, and dismissed
the defendants' counterclaims.
Discussion. "The standard of review of a grant of summary
judgment is whether, viewing the evidence in the light most
favorable to the nonmoving party, all material facts have been
established and the moving party is entitled to a judgment as a
matter of law." Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass.
6 The defendants' answer and counterclaim specified $18,400 in
damages, but that amount was modified at the hearing on the
motions for summary judgment.
7 The judge also denied the defendants' motion for
reconsideration.
5
117, 120 (1991). When the parties cross-move for summary
judgment, "we view the record in the light most favorable to the
nonmoving party against whom the judge allowed summary judgment,
here, [the defendants]." Gutierrez v. Managers of Flagship
Wharf Condominium, 100 Mass. App. Ct. 678, 682 (2022), quoting
Marhefka v. Zoning Bd. of Appeals of Sutton, 79 Mass. App. Ct.
515, 516 (2011). Our review is de novo. 8 See Matthews v. Ocean
Spray Cranberries, Inc., 426 Mass. 122, 123 n. 1 (1997).
We first address the defendants' argument that the judge
erred in granting summary judgment in favor of Merkulova on her
claim for violation of G. L. c. 186, § 15B (the statute or
Section 15B). Although our review is de novo, we agree with the
judge's reasoning and conclusion. The undisputed facts
establish that the deposit at issue, although equal to the
amount of first month's rent and often improperly referred to as
such by the defendants, was tendered for the sole purpose of
reserving the apartment until such time as a lease was executed.
In fact, as Schlom makes clear in his affidavit, Merkulova was
required to wire the money to "hold" the apartment. Because, as
the judge correctly determined, Section 15B does not permit a
landlord to extract a hold fee from a prospective tenant, the
defendants violated the statute.
8 We note that the defendants incorrectly state that the
applicable standard of review is for abuse of discretion.
6
The statute states, in relevant part:
"At or prior to the commencement of any tenancy, no lessor
may require a tenant or prospective tenant to pay any
amount in excess of the following: (i) rent for the first
full month of occupancy; and, (ii) rent for the last full
month of occupancy calculated at the same rate as the first
month; and, (iii) a security deposit equal to the first
month's rent provided that such security deposit is
deposited as required by subsection (3) and that the tenant
is given the statement of condition as required by
subsection (2); and, (iv) the purchase and installation
cost for a key and lock"
G. L. c. 186, § 15B 1 (b). The terms of this provision are
"unambiguous." Mellor v. Berman, 390 Mass. 275, 279 (1983).
The statute lists four permissible charges. If a fee is on the
list, then it is a permissible upfront charge; if it is not on
the list, then it is impermissible. The charge at issue in this
case, $3,400 to hold the apartment, is not included on the list
of permissible charges. Accordingly, the charge constitutes a
violation of the statute.
Furthermore, the fact that the deposit would have been
credited towards the first month's rent had Merkulova signed a
lease and taken possession of the apartment, does not negate the
fact that Merkulova was required to pay $3,400 -- in advance of
signing a lease and before she assumed possession -- to reserve
the apartment. In sum, in the circumstances presented, the
defendants' characterization of the deposit as first month's
rent does not insulate them from running afoul of the statute.
7
Next, the defendants assert, with an argument that barely
meets the requirements of Mass. R. A. P. 16(a)(9), as appearing
in 481 Mass. 1628 (2019), that the judge "wrongfully deemed"
their refusal to return the deposit as a violation of c. 93A.
This argument is set forth in one sentence within the caption of
a subheading without any legal citations. 9 Despite the brevity
of the argument, we understand the defendants' position to be
there can be no violation of c. 93A on the ground there was no
violation of Section 15B. This argument cannot succeed given
our conclusion that the defendants violated Section 15B and
under 940 Code Mass. Regs. § 3.17(4)(a), the Attorney General
defines a violation of Section 15B to be an unfair or deceptive
practice under c. 93A.
Lastly, we turn to the defendants' assertion that the judge
erred in granting summary judgment in Merkulova's favor on their
counterclaims alleging detrimental reliance and breach of
contract and instead should have granted their motion for
summary judgment as to both claims. Again, we agree with the
9 Failure to provide us with a meaningful argument supported by
proper authority may result in a waiver of the argument. See
Lyman v. Commissioner of Correction, 46 Mass. App. Ct. 202, 208
(1999). Although we do not deem the defendants' argument that
there was no violation of c. 93A waived, we consider any
challenge to the award of treble damages waived as the
defendants make no argument or even mention this aspect of the
judgment in their brief.
8
judge's analysis and her conclusion that the defendants are not
entitled to judgment as a matter of law on either claim.
The defendants' claim of detrimental reliance is that they
took the apartment off the market based on Merkulova's
representation that she would execute a lease and then lost
money when they subsequently rented the apartment for fewer
months at a lower monthly rate. At this stage of the
proceedings, to prevail on a claim of detrimental reliance, the
defendants must present affirmative evidence to establish:
"(1.) [a] representation or conduct amounting to a
representation intended to induce a course of conduct on
the part of the person to whom the representation is
made[;] (2.) [a]n act or omission resulting from the
representation, whether actual or by conduct, by the person
to whom the representation is made[; and] (3.) [d]etriment
to such person as a consequence of the act or omission."
Clickner v. Lowell, 422 Mass. 539, 544 (1996), quoting Turnpike
Motors, Inc. v. Newbury Group, Inc., 413 Mass. 119, 123 (1992).
Here, the undisputed facts do not sufficiently support the
defendants' claim so as to defeat summary judgment in favor of
Merkulova. First, Schlom's statement in his affidavit as to the
reason why he took the apartment off the market does not
establish that Merkulova intended "to induce" him to remove the
apartment from the MLS listing if only because, as Schlom
acknowledges, he removed the apartment from the MLS listing
before he sent a draft lease to Long. No negotiations regarding
the lease had begun let alone concluded. Indeed, the defendants
9
had not yet accepted Merkulova's rental application when the
apartment was taken off the market. Furthermore, nothing
required Schlom to take this action. In addition, other than
Schlom's statements, the record on summary judgment is devoid of
any facts which support the allegation that the defendants lost
out on other opportunities to rent the apartment during the
short time it was removed from the rental listings.
The defendants' breach of contract claim is similarly
unavailing. This claim stems from the defendants' belief that
the rental application is a binding contract which, in the
absence of any rejection of the tenancy by the defendants,
required Merkulova to execute a lease agreement and, the
defendants argue, is supported by a provision of the rental
application which states: "Deposit is to be applied as shown
above, or applied to actual damages sustained by the Owner,
except it is to be refunded if said application is not accepted
by the Owner." The defendants' theory is that Merkulova
breached the contract when she failed to sign the lease, and
subsequently forfeited her deposit according to the above quoted
provision of the rental application.
To begin with, the rental application was just that -- an
application –- signed only by one person, the prospective
10
tenant. 10 Second, and more importantly, the provision regarding
the retention of damages on which the defendants rely does not
comport with the strictures of Section 15B. Under Section 15B,
the only damages recoverable by a landlord from a deposit are
specific damages incurred for property damage and unpaid rent
and may only be retained from a properly held security deposit,
(not a hold fee or first month's rent), which Merkulova had not
yet provided. 11
The defendants' final argument is that a rejection of their
breach of contract claim is tantamount to a rejection of freedom
of contract. This argument ignores the express purpose of the
statute which is to limit the freedom of contract between
landlords and tenants. "The Legislature enacted G. L. c. 186,
§ 15B, in response to the 'well known' problems associated with
10 Alternatively, the defendants argue that the rental
application constituted an offer to rent the apartment, but they
do not specify how or when that offer was accepted.
11 General Laws c. 186 § 15B (4) provides in relevant part:
"[T]he lessor may deduct from such security deposit for the
following: (i) any unpaid rent or water charges which have
not been validly withheld or deducted pursuant to any
general or special law[;] (ii) any unpaid increase in real
estate taxes which the tenant is obligated to pay pursuant
to a tax escalation clause which conforms to the
requirements of section fifteen C; and (iii) a reasonable
amount necessary to repair any damage caused to the
dwelling unit by the tenant or any person under the
tenant's control or on the premises with the tenant's
consent, reasonable wear and tear excluded . . . . No
deduction may be made from the security deposit for any
purpose other than those set forth in this section."
11
security deposits. Section 15B protects the rights of tenants
by, among other things, imposing strict requirements governing
the handling of security deposits and restricting the amount of
upfront charges that a landlord may collect from a tenant or
prospective tenant." (Citation omitted.) Flemming v. Greystar
Mgt. Servs., L.P., 100 Mass. App. Ct. 469, 471 (2021). In
passing the statute, "the Legislature recognized that tenants
have less bargaining power than landlords and are less able to
vindicate their rights in court." Phillips v. Equity
Residential Mgt., L.L.C., 478 Mass. 251, 254 (2017), citing
Mellor, 390 Mass. at 282. As the judge aptly observed: "The
rights of landlords and tenants with respect to any pre-tenancy
12
demands or tenders of money are governed by [G. L. c. 186,
§ 15B] -– not the general application of contract law." 12
Judgment affirmed.
By the Court (Vuono, Meade &
Walsh, JJ. 13),
Assistant Clerk
Entered: March 12, 2024.
12 Both parties have requested an award of appellate attorney's
fees and costs. Merkulova is entitled to such an award; the
defendants are not. Merkulova may, within fourteen days of the
issuance of the rescript in this case, submit a detailed and
supported submission of the fees sought, in accordance with the
procedures set forth in Fabre v. Walton, 441 Mass. 9, 11 (2004).
The defendants will have fourteen days thereafter to file a
response.
13 The panelists are listed in order of seniority.
13